Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act on March 27, 2020. There are numerous benefits and incentives to businesses to encourage employee retention. Please see below for a summary of these new tax provisions. Please contact our office to determine which program best suits your needs. In most cases, only one program can be used.
Employee retention credit for employers subject to closure due to COVID-19
The provision provides a refundable payroll tax credit for 50 percent of wages paid by employers to employees during the COVID-19 crisis. The credit is available to employers whose (1) operations were fully or partially suspended, due to a COVID-19-related shut-down order, or (2) gross receipts declined by more than 50 percent when compared to the same quarter in the prior year. The credit is based on qualified wages paid to the employee. For employers with greater than 100 full-time employees, qualified wages are wages paid to employees when they are not providing services due to the COVID-19-related circumstances described above. For eligible employers with 100 or fewer full-time employees, all employee wages qualify for the credit, whether the employer is open for business or subject to a shut-down order. The credit is provided for the first $10,000 of compensation, including health benefits, paid to an eligible employee. The credit is provided for wages paid or incurred from March 13, 2020 through December 31, 2020.
Delay of payment of employer payroll taxes
The provision allows employers and self-employed individuals to defer payment of the employer share of the Social Security tax they otherwise are responsible for paying to the federal government with respect to their employees. Employers generally are responsible for paying a 6.2-percent Social Security tax on employee wages. The provision requires that the deferred employment tax be paid over the following two years, with half of the amount required to be paid by December 31, 2021 and the other half by December 31, 2022. The Social Security Trust Funds will be held harmless under this provision.
Paycheck Protection Program (PPP)
The program is designed to make funds available to companies to pay for payroll costs, employee benefits such as health insurance, salaries and wages, mortgage interest payments, rent and utilities. See subpage for further details.
SBA Economic Injury Disaster Loan (EIDL)
The SBA Disaster Program has been authorized and the SBA is actively taking applications. Please go to following link to apply:
These EIDL loans are working capital loans for payroll, accounts payable, and other bills that could have been paid had the disaster not occurred. Applicants need to show they have suffered working capital losses due to the coronavirus disaster. SBA will do internal testing to determine eligibility.